Stantec Economist explores the economic impact of COVID-19 in Australia

COVID-19 or simply ‘the pandemic’ has been described as a one-in-a-hundred-year eventⁱ.  It has caused significant and prolonged economic downturn across the globe and triggered Australia’s first recession in nearly 30 years. 

Having recently assessed the economic impact of the pandemic on Glasgow’s economy for Glasgow’s City Council and its Chamber of Commerce, Economist Kyle Barrie asks, 'how can Australia recover from the second “recession it had to have”?'.^iI 

Pre-Pandemic Economic Outlook

Before the pandemic, Australia’s economic outlook was nothing to write home about. Despite the open economy’s ability to dodge waves of recessions, including the 'global' financial crash of 2008, Australia’s Gross Domestic Product (GDP) growth—a national measure of economic performance—was on a linear trend downward. 

In its November 2019 outlook, the Organisation for Economic Co-operation and Development (OECD) projected GDP growth of just 2.25% in 2020-21. The uninspiring rate was internationally dampened by weaker growth in China (Australia’s biggest trading partner) and domestically dulled by a marked decline in residential investment and development. 

Pandemic Economic Outlook 

As the pandemic took hold and the combined effects of border closures and business restrictions took effect, Australia saw a record 7% drop in GDP in June 2020. The following month, the unemployment rate peaked at 7.5%—the highest in over 20 years.^iIi  

Once thriving centres and driving forces of Australia’s economic growth, key urban places such as Sydney, Melbourne, Brisbane, and Perth became ghost towns, with footfall down by 76%.^iv Not too different from Glasgow, and many other major cities across the world, the largest impact was on industries more dependent on human contact, including accommodation, food services, arts, and recreation.  

As the country emerges from the pandemic and quite literally opens up for the first time in 23 months, it finds a white-collar workforce firmly settled into their home offices and inflation at 3.5%, driven by disrupted supply chains impacting everything from house building to food prices and fuel.^v 

Despite an expected return to pre-pandemic GDP levels this year, the data shows Australia’s economy is likely to return to stagnant growth. The country has also lost over two years of growth and as of February 2022 is 1.3% below its pre-pandemic GDP trajectory.^vi  

It is critical, therefore, that we understand the early interventions and policy levers that can support the recovery and attractiveness of key urban places to investors, developers, and related workforce. 

Post-Pandemic: Respond & Recover

Building on our experience in Glasgow and other development projects across the UK in the last two years, we believe that response of Australia’s urban places should follow three interrelated steps:

• Estimating the Economic Impact. While the healthcare response in Glasgow and Australian cities differs, it’s fair to say that the impact of lockdowns and associated measures for recovery are similar. Critical to each City’s response is an appreciation of the scale of the impact and where the biggest damage has occurred. While this might be implicit in analysis of macro and microeconomic trends, consideration of the demographic, socioeconomic and sectoral make-up of local City economies is critical in identifying the nuances of the pandemic’s impact on urban places at local level.
  
• Engagement. Effective communication and stakeholder engagement with communities is crucial to successful design and implementation of any intervention or policy program. As part of our Glasgow work, our Economics team engaged with multiple stakeholders across the City, including businesses, academia, leisure facilities and public sector bodies, giving us a clearer picture of the scale of the impact and potential routes to economic recovery. Recognising the similarities of the impact noted above, Australia’s response needs to consider the effect that the pandemic has had on customer facing, traditionally lower income sectors, and importantly, respond in an inclusive manor that involves the associated workforce related communities. 
  
• Best Practice. Learning from international best practice, and the policy & intervention approaches adopted elsewhere may help Australia respond and recover. Stantec is helping our clients and communities navigate the global pandemic via our COVID-19 Ideas page, a central resource that pulls together the thoughts of our globally recognised multi-disciplinary teams. 
  

Using this approach, our Economists identified responses and economic levers to help Glasgow’s economy recover. This has ranged from provision of high-quality office spaces, adaptation of business rates, flexible working hours and city promotion, to investing in high-quality, free public transport to ‘get Glasgow going’. 

_____________

ⁱ "Australian leader warns coronavirus outbreak is a 'once-in-100 year' crisis”: Available at: https://www.cnn.com/2020/03/18/australia/coronavirus-covid-19-update-australia-intl-hnk/index.html  

^iI Paul Keating, who was then Treasurer, dubbed the early 1990s recession "the recession we had to have". Available at: https://www.abc.net.au/news/2020-04-15/how-coronavirus-crisis-compares-to-1990s-recession-australia/12148020

^iIi One year of COVID-19. Available at: https://www.abs.gov.au/articles/one-year-covid-19-aussie-jobs-business-and-economy

^iv Data from Google’s Community Mobility Reports provide insights into visitor trends to retail/recreation places at a range of scales – national, state and local government area. The Google data show percentage changes in visitor numbers from a baseline day: “the median value from the 5-week period Jan 3 - Feb 6, 2020”. Available at: Google’s Community Mobility Reports

^v The Consumer Price Index (CPI) measures household inflation and includes statistics about price change for categories of household expenditure. Available at: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release#:~:text=Annual%20CPI%20inflation%20increased%20to,the%20highest%20since%20June%202014

^vi The OECD Weekly Tracker of GDP growth. Available at: https://www.oecd.org/economy/weekly-tracker-of-gdp-growth/